There were two articles recently both exploring the same possible outcome; that investor returns from capital markets could be much lower in the coming years.

The first article was from the Wall Street Journal with the title How Safe Are Your Investments, Really? And the other was an interview with Jeremy Grantham in Barron’s.

Included in the WSJ piece was the following;

Strip out these one-off gains and inflation, Rob Arnott recently suggested, and investors ought more realistically to expect about 1.5% a year plus dividends—meaning, in the current environment, an annual return of about 3.5% in real terms. That’s a far cry from 10%.

One of the many takeaways from the Grantham interview was the reiterated expectation of 1.7% annualized growth for US equities.

The point of these articles is not to agree or disagree with the conclusions drawn, after all things have not played out as Grantham has expected very often (not an obstacle to returns), but to think about how to manage a portfolio (either for clients or as an individual) if either Arnott or Grantham turn out to be correct.

No matter what markets end up doing, advisory clients and do-it-yourselfers still have financial plans that likely require some amount of growth over time in order to have a chance of succeeding without something, such as desired lifestyle or working longer than hoped for, having to give.

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